China’s Economy Still Flying High: Mark Mobius

China’s economy has slowed for six consecutive quarters and exports growth is almost stagnant, but the world’s second-largest economy is still “flying” high compared to advanced economies like the United States and Europe and will do very well over the long term, said Mark Mobius, Executive Chairman at Templeton Emerging Markets Group.

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Exports, while slowing, are “not disappearing,” Mobius said in an interview with CNBC on Tuesday. “They are still very, very big and I am quite optimistic China will continue to power ahead,” he added.

Mobius says a very pessimistic view would put China’s GDP growth at 5 percent for the current year, which is still “five times more than the U.S.”

“They are not landing, they are continuing to fly and chances are growth would be better than that. It'd be more like 7 percent,” he said.

Faltering demand from China’s two biggest customers – the European Union and U.S. – caused Chinese exports to post just one percent growth in July from a year earlier, the poorest showing since January, when exports fell. A Reuters poll had expected exports to grow 8.6 percent in July.

The 7.6 percent expansion of the economy posted in the second quarter was also the weakest in three years, prompting some economists to say that the country is already in a “hard landing.”

These worries have hurt Chinese stocks, and the Shanghai stock market is the worst-performing bourse in Asia this year, having lost nearly 3.9 percent. Measures to bolster the economy such as slashing reserve requirement ratios for banks and cutting interest rates have not had an impact on the stock market. In the meantime, investors are still waiting for these measures to take effect and the economy to rebound.

Despite the economic challenges facing China, Mobius thinks that the picture is still positive and he is continuing to buy Chinese stocks, regardless of daily shifts in sentiment.

“We continue to buy Chinese stocks, particularly consumer oriented stocks,” Mobius said. “Sentiment changes from day to day. Markets go down because people think that Europe is in trouble or U.S. has got a problem or China is slowing but the reality is that over the long term these economies will do very well.”

He favors consumer stocks because he believes there will be a consumer boom in China as workers’ wages increase at a 20 percent clip per year and the Chinese government works to boost domestic consumption’s share of GDP.